Thousands of the UK’s largest unemployed families could soon receive significant financial boosts from the government, following Labour’s proposal to eliminate the two-child benefit cap.

Keir Starmer, Labour’s leader, has all but confirmed that this cap will be lifted in the upcoming Budget. This decision is part of his strategy to strengthen his leadership amidst pressures from the party’s left wing.

Initially, the Treasury considered a plan to gradually reduce the payments, aiming to avoid substantial payouts to the largest families currently impacted by the cap.

However, after facing opposition from within the Labour party, ministers have resolved to completely remove the cap, a move that will cost £3.5 billion annually.

Opponents of the cap argue it has contributed to worsening child poverty. However, official data analysis suggests that removing the cap would provide thousands of pounds annually in extra benefits to nearly 200,000 large families where no one is employed.

Projections indicate that the largest families affected by this policy change could become eligible for over £10,000 per year in additional benefits.

Shadow welfare secretary Helen Whately said it was ‘deeply unfair’ to ask taxpayers to fund big handouts to large families on the dole.

‘This will cost billions and be paid for by the taxpayer,’ she said. ‘We must question what ministers are thinking.

‘It’s wrong to make hard-up households pay even more in tax to fund people on benefits having huge families. Keir Starmer should get a backbone and stand up to his left-wing backbenchers rather than picking the pockets of hardworking families again.’

Critics of the two-child cap say it penalises children unfairly (file photo)

Rachel Reeves, pictured on Monday, initially resisted lifting the cap on cost grounds

Shadow welfare secretary Helen Whately (pictured) said ditching the cap would be ‘deeply unfair’ to taxpayers

Former work and pensions secretary Esther McVey said it was ‘financially and morally irresponsible’ to encourage people to have children they cannot afford to raise.

The benefit cap limits means-tested benefits like universal credit and child tax credit payments to the first two children, costing families a typical £3,455 in lost benefits for each additional child.

The Institute for Fiscal Studies has estimated the cap costs affected families an average of £4,300 each.

Figures produced by the Department for Work and Pensions (DWP) show that 470,000 families are now affected by the policy.

Almost two-thirds (297,000) have three children, while a quarter (117,000) have four. A further 37,000 affected families have five children, while 18,260 are listed as having ‘six or more’.

The DWP does not provide a breakdown of the largest families. But separate figures held by HM Revenue and Customs show that child benefit, which is not subject to the cap, was paid to more than 16,000 families with six children, more than 5,000 with seven children and even to 15 families with 13 children or more.

In theory, an affected family with five children would qualify for additional benefits worth around £10,000 a year if the cap is lifted.

The total benefits received by a family is covered by a separate ‘benefits cap’ of £25,320 in London and £22,020 outside – although Labour MPs are also pushing to lift this.

The Prime Minister yesterday dropped the heaviest hint yet that the cap will be lifted in the November 26 Budget.

He told ITV’s Lorraine programme: ‘I can tell you in no uncertain terms I’m determined to drive child poverty down.

‘It is what the last Labour government did, and it’s one of the things we were proudest of.

‘I am personally determined that is what we are going to do.

‘You won’t have to wait much longer to see what the measures are.’

Asked whether that would involve axing the two-child benefit cap, the PM said: ‘I wouldn’t be telling you that we’re going to drive down child poverty if I wasn’t clear that we will be taking a number of measures in order to do so.’

Sir Keir and Rachel Reeves initially resisted lifting the cap on cost grounds. Seven Labour MPs were suspended from the party last year after voting to end it.

But the government’s position has softened amid fears that Sir Keir could face a coup from MPs on the party’s so-called ‘soft left’.

Former Labour MP Rosie Duffield, who quit the party over the issue last year and now sits as an independent, accused Sir Keir of ‘a desperate reaction to the polls, not a conviction or belief, or an apology to us for being threatened for fighting child poverty’.

The two-child cap was introduced by the Conservatives in 2017 and Kemi Badenoch has committed to reintroducing it if it is scrapped.

Nigel Farage has recently rowed back on a commitment to abolish the cap, saying Reform would now only lift it for families in work.